Reopening Assessment Based Solely on Illegible Third-Party Loose

Reopening Assessment Based Solely on Illegible Third-Party Loose Papers Lacking Nexus is Wholly Unsustainable

Issue

Whether the revenue is legally justified in reopening an assessment under Section 147 and issuing a notice under Section 148 based entirely on an illegible loose paper seized from an unrelated third party, where the satisfaction note fails to establish any nexus between the assessee and the transaction, and the underlying sale deed confirms the property was sold as agricultural land.

Facts

For the Assessment Year 2018-19, the Income Tax Department initiated reassessment proceedings against the petitioner under Section 147 by issuing a notice under Section 148.
The sole basis for reopening the assessment was information derived from a loose paper seized during a search on a non-related third party.
The data on the seized loose paper was illegible and did not contain any clear information pointing to the petitioner.
The Assessing Officer’s satisfaction note did not record or demonstrate any rational link, connection, or nexus between the petitioner and the third-party entities involved in the search.
The registered sale deed available on record explicitly confirmed that the land in question was sold strictly as agricultural land.
The reassessment proceedings culminated in an assessment order passed under Section 147 read with Section 143(3), treating certain amounts as unexplained money under Section 69A.

Decision

Absence of Tangible Material and Nexus: Reopening an assessment cannot be sustained when it relies entirely on a third-party document that lacks a clear, rational connection to the assessee.
Illegible Documents Cannot Form Belief: A loose paper containing completely illegible data cannot form the basis for a reasonable person to form a “reason to believe” that income has escaped assessment.
Failure of the Satisfaction Note: The reassessment is bad in law because the tax authority’s satisfaction note failed to detail or establish how the petitioner was linked to the entities under investigation.
Contradiction with Official Records: The department’s allegations were completely contradicted by the registered sale deed on record, which proved the transaction involved agricultural land.
Final Ruling: The impugned notice issued under Section 148 and the consequent reassessment order passed under Section 147 were quashed and set aside in favor of the assessee.

Key Takeaways

Third-Party Documents Require Nexus: Information recovered from a third party cannot be blindly used against an assessee unless the department uncovers independent, corroborative evidence establishing a clear link.
Vague or Illegible Information is Not Evidence: The “reason to believe” required for reopening an assessment must be founded on cogent, legible, and tangible material, not on cryptic or unreadable notations on loose sheets.
Satisfaction Note Must Speak for Itself: If the satisfaction note recorded by the Assessing Officer fails to explicitly bridge the gap between the seized material and the taxpayer, the entire jurisdictional foundation of the reopening fails.

HIGH COURT OF GUJARAT

Naveenchandra Prahladbhai Patel

Income Tax Officer

A.S. Supehia and Ms. VAIBHAVI D. NANAVATI, JJ.

R/SPECIAL CIVIL APPLICATION NO. 7431 of 2026

JUNE 8, 2026

Hardik V. Vora for the Petitioner. Aaditya D. Bhatt for the Respondent.

ORDER

A.S. Supehia, J.- RULE. Learned Senior Standing Counsel waive service of notice of rule for and on behalf of the respondent.

2. Registry shall accept appearance note of learned Senior Standing Counsel Mr. Aaditya Bhatt on behalf of the respondent authority, as and when it is filed.

3. The short issue is involved in the present writ petition hence, the same is taken up for final hearing with consent of the learned advocates appearing for the respective parties.

4. The petitioner has challenged the impugned notice dated 27.03.2025 issued under section 148 of the Income Tax Act, 1961 (for short “the Act”) for the Assessment Year (AY) 2018-19 and consequent assessment order u/s 147 r.w.s. 143(3) of the Act dated 30.03.2026.

5. Learned advocate Mr. Vora appearing for the petitioner has submitted that the loose paper reliance upon which is placed is neither authored nor signed by the petitioner or any of the co-owners of the land and it does not mention the name of the petitioner or any of the co-owners or purchaser. He has submitted that the only name appearing on the page is Rajubhai Thakkar Dev, who is neither the co-owner nor the purchaser and with whom petitioner has no connection and in fact, the petitioner has no knowledge of the origin or contents of the said document. It is submitted that mere reference to the land survey number without any corroborative evidence is insufficient to establish any nexus with the petitioner.

6. Learned advocate Mr. Vora has further submitted that perusal of the statement and loose paper indicate that they merely contain details of land/plots available for sale and do not evidence any concluded financial transaction and further it refers to Survey No.581 as NA land, whereas the land sold by the petitioner was agricultural land. It is submitted that the issue is squarely covered by the decision of this Court in the case of Deepak Chinubhai Shah v. Dy. CIT (Gujarat) (Special Civil Application No.13298 of 2025 and allied matter decided on 13.01.2026). Thus, it is urged that the present petitions may be allowed.

7. Per contra, learned Senior Standing Counsel has vehemently opposed the present writ petition and has submitted that at this stage, the impugned action of the respondent of reopening of assessment and passing of order u/s 147 r.w.s. 143(3) of the Act may not be interfered since the petitioner had ample opportunities to defend reopening of assessment in the regular assessment proceedings.

8. The facts, which are established from the record, are that reopening of assessment is premised on the loose paper, which refers to the land being Revenue Survey No. 581 with Non-agricultural (NA) having prescribed rate of Rs. 17,000/- per square yard. The data mentioned in the said paper is illegible and only name appearing in the paper is of some Rajubhai Thakkar Dev, who is neither the co-owner nor the purchaser, and with whom the petitioner has no connection. Satisfaction note also does not refer that the petitioner has any connection with B Safal Group, City Estate Group, City Estate Management India and City Procon Realtors Private Limited. The information on the loose paper is premised on non-related 3rd party. Moreover, it is not in dispute and also established from the sale deed, which is on record, that the petitioner has sold the land in question on 03.03.2018 as an agricultural land.

9. This Court, in an identical issue relating to the search proceedings conducted on B Safal Group, City Estate Group, City Estate Management India and City Procon Realtors Pvt Ltd in the case of Deepak Chinubhai Shah (supra), has held thus:

“12. The assessment in the case of the petitioner for the year 2021-22 is sought to the be reopened on the basis of the aforementioned information contained in the extract of the inquiry register. It is not in dispute that the petitioner had sold the land vide sale deed dated 07.10.2020, the registration of the same was done in the month of January 2021. It is also noticed from the sale deed that the land in said question of survey number being Block No. 1445 – Old Survey No. 1568 was an agricultural land at the time of sale in the month of October 2020. The information relating to the date in the seized document is 22.04.2021, is after the sale deed dated 07.10.2020, this is the first flaw which is noticed by us. Secondly, with regard to the status of the land mentioned in the seized document. The status of the land in question refers to “NA” i.e. a non-agricultural land and unquestionably the land which was sold by the petitioner vide sale deed dated 07.10.2020 is an agricultural land. The name of the seller appears to be Sanjay Thakkar. Thus, there are three components which do not reconcile with the petitioner (i) the date mentioned as 22.04.2021, (ii) the status of the land being shown as “NA” i.e. non-agricultural and (iii) the name of the seller -Sanjay Thakkar.

13. The questions and answers forming part of the statements recorded under the provisions of 131 of the IT Act, in the case of one Shri Nagjibhai Bhavadiya, the searched person, does not in any manner mention the name of the petitioners. Thus, we do not find any direct or indirect link with the seized document and the same does not even remotely connect the rate mentioned of the concerned question of land with the petitioner. Thus, the revenue has attempted to reopen the assessment year 2021-22 only on the basis of some vague information allegedly connected from the seized document and the same does not in any manner relates to the present petitioner. Thus, the invocation of the proceedings under Section 148 of the IT Act, itself is ill conceived and unsustainable in light of the information contained in the seized document.

FINAL ORDER

14. Hence, we are of the opinion that the assessment has been reopened on the basis of conjunctures and surmises, the same action is required to be quashed and set aside. Accordingly, the captioned writ petitions stand allowed. The impugned Notices dated 31.03.2025 issued under Section 148 of the IT Act are hereby quashed and set aside. No order as to costs. Rule is made absolute.”

10. On an identical issue this Court has quashed and set aside reopening of assessment on identical facts and similarly worded loose papers, pointing out the status of the land as ‘NA”, whereas the petitioner has sold agricultural lands. The price assumed by the revenue alleging escapement of income, can be said to be only on hypothesis, and hence, the present writ petition succeed. The impugned notice and the consequent assessment order are hereby quashed and set aside.